Input Stories

The NAM Legal Center stood up for manufacturers in federal court this week, arguing that the Securities and Exchange Commission unlawfully suspended a rule governing proxy advisory firms.

A quick refresher: Proxy advisory firms advise institutional investors on how to vote on the policies of public companies in which the funds invest. This gives the firms significant power over public companies.

The fight: The NAM secured a significant victory in 2020 when the SEC finalized a rule increasing oversight of proxy advisory firms, which had long operated without SEC oversight.

• At the beginning of the Biden administration, however, the SEC’s new leadership announced it would not enforce the rule, a clear violation of administrative law.

Our move: Shortly after the SEC announced it wouldn’t enforce the 2020 rule, the NAM Legal Center filed a challenge to prevent the agency from abdicating its responsibilities.

Our case: Arguing before the U.S. District Court for the Western District of Texas this week, the NAM made clear that the SEC acted unlawfully by suspending the compliance date of the proxy firm rule indefinitely without going through the required public notice-and-comment process to amend or repeal it.

• The SEC, in turn, argued that the agency hasn’t technically suspended the rule, but rather that SEC staff has made a nonbinding and “informal” recommendation not to enforce it.

Our take: “The SEC is attempting to end-run its legal obligation to enforce this rule,” said NAM Deputy General Counsel for Litigation Erica Klenicki. “We are in court fighting for manufacturers and their investors across the United States, who deserve protection from the outsized influence of proxy firms and who depend on the SEC, and all federal agencies, to adhere to the rule of law.”

Read the full story here.